For personal use only - ASX2016/04/06 · Residential & Land Development: Steve Evans Construction:...

Fletcher Building Limited This

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pic??Distribution Investor Day

6 April 2016

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Fletcher Building Distribution Investor Day | © April 2016

This presentation contains not only a review of operations, but also some forward looking statements about Fletcher Building and the environment in which the company operates. Because these statements are forward looking, Fletcher Building’s actual results could differ materially. Statistics included in this presentation are sourced from Statistics NZ unless otherwise stated.

Disclaimer

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Agenda

8:00am - 8:30am Coffee/Registration

8:30am - 9:15am CEO Update / Q&A Mark Adamson – Chief Executive OfficerLee Finney – Chief Transformation Officer

9:15am - 9.30am Divisional Introduction Dean Fradgley – Chief Executive, Distribution

9.30am -10:15am PlaceMakers Bruce McEwen – General Manager

10:15am - 10:30am Morning tea

10:30am - 11.30am Plumbing distribution:Mico and Tradelink

Bryn Harrison – GM, MicoAlan Ball – GM, Tradelink

11.30am - 12:30pm Steel distribution - NZ and Australia

Hamish McBeath – GM, Steel DistributionPaul Tudor – GM, Stramit

12:30pm – 1:00pm Lunch

1pm Depart for site visits from rear entrance on Pitt Street

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CEO UpdateMark AdamsonCEO

Fletcher Building Distribution Investor Day Presentation 2016

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Structure will support greater focus on business performance

Building Products:

Matt Crockett

International: Francisco Irazusta

Distribution:Dean Fradgley

Residential & Land

Development:Steve Evans

Construction:Graham Darlow

Chief Transformation

Officer:Lee Finney

• GBCWinstone (NZ) including Higgins Aggregates

• Firth (NZ) • Humes (NZ)• Rocla Pipelines

(Aus)• Winstone

Wallboards/Tasman Insulation (NZ)

• Fletcher Insulation (Aus)

• Iplex (NZ & Aus) • Sims Pacific

Metals (NZ)• Fletcher

Aluminium (NZ)

• Formica Asia• Formica Europe• Formica North

America• Laminex (NZ &

Aus)• Roof Tile Group

(NZ; Africa; Asia; Europe; USA)

• PlaceMakers (NZ)• Mico (NZ)• Tradelink (Aus)• Stramit (Aus)• Tasman Sinkware

(Aus);

• Steel Distribution:

• Fletcher Living (NZ)

• Infrastructure (NZ)• Fletcher EQR (NZ)• South Pacific• Higgins

Contracting (NZ & Fiji)

• Building + Interiors (NZ)

• Procurement• Marketing• Operational

Excellence• Transformation

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Overview of DistributionDean FradgleyCE Distribution


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• Present the divisional strategy

• Cover key strategic areas of focus and growth

• Meet the management team

Objectives for today’s Distribution Investor Presentation

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The Distribution portfolio has 11 businesses across New Zealand and Australia which are well recognised within their markets

• Enlarged Distribution covers New Zealand and Australian Distribution business units

• 1st or 2nd in their markets

• Operate within traditional markets

• Well recognised within their industries

• Well established brands

• At different points in their maturity

• Different scales of operation

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Our Distribution division operates across Australia and New Zealand with a diverse portfolio of product businesses

Australia’s 2nd largest roll former and supplier to the building industry with steel roofing, cladding, rainwater and door systems

FY15 Revenue:A$460mStaff : 850Key customer segments:• Installers• Builders and

developers• Network resellers

New Zealand’s largest specialty plumbing and bathroom merchant supplying trade and retail customers

FY15 Revenue: NZ$210mStaff: 450Key customer segments:• Residential and

commercial construction

• Repairs and maintenance

Supplies bathroom and plumbing products through a network of 200+ branches across Australia

FY15 Revenue: A$730mStaff: 1,480Key customer segments:• Network plumbers• Commercial

construction

New Zealand's leading building supplies merchant specialising in the trade and B2B segment of the market

FY15 Revenue: NZ$1,167mStaff: 2,400Key customer segments:• Group home

builders• SME trade

customers• Commercial

New Zealand's leading importer, distributor and processor of steel

FY15 Revenue: NZ$440mStaff: 600Key customer segments:• Infrastructure and

commercial construction

• Manufacturing and Engineering

• Roofing and cladding roll formers

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We are in year three of executing the Distribution strategy

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EBIT

NZ$148m17%

Revenue

NZ$3.2bn

ROFE

14.1%2.3%

Capital expenditure

NZ$54m83%

Gross margin realisation

20%18%

FY15 financial highlights – total division

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Distribution is a key component of the Group’s financial performance

FY15 Revenue

Distribution

Rest of Group

FY15 EBIT

Distribution

Rest of Group

FY15 Revenue

PlaceMakers

Mico

TradeLink

Stramit

Steel Distn NZ

Other

FY15 EBIT

PlaceMakers

Mico

TradeLink

Stramit

Steel Distn NZ

Other

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Distribution has momentum and has delivered robust organic profit by executing its customer leading strategy • Strong revenue and double-digit year on year EBIT growth in New Zealand• Accelerated performance in PlaceMakers, successful turnaround in Mico and

sustainable manufacturing improvements in Pacific Coil Coaters• Benefits of a differentiated customer value proposition and customer service

promise tangibly linked to profit improvement• NZ business units are key earning centres for the division. Learnings are being

deployed in Australia • Australian portfolio has scale that needs to be leveraged• Average EBIT to free cash conversion of 100%• Capex / funding light business

Demonstrated delivery in turnarounds and transformational growth in New Zealand Distribution, which has momentum in a competitive and buoyant market.

We are now deploying this into Australia

FY15 EBITPlaceMakers

Mico

TradeLink

Stramit

Steel Distn NZ

Other

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Distribution has the potential to unlock more shareholder value through the economic cycle

Organic growth

Profitable market share

Execution in Australia

Critical areas How

• Buy better / sell better• Gross margin realisation• Efficiency and synergy

• Core category penetration• Shop within a shop concept• Omni channel• Regional network performance

• Service and growth potential in Australia

• Export learnings and best practice from New Zealand strategies

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The Distribution business units differentiate themselves within their markets

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Strategic review and areas of focus for the future

Cost

Operations

Commercial

• Leveraging FB’s newly created Asian sourcing office• Promoting own exclusive branded ranges and

specifications (Raymor / Adesso in Mico and Tradelink, for example)

• Grow core customers and SOW – e.g. GHBs and Network Plumbers sectors

• FB operational excellence deployed in Pacific Coil Coaters and Stramit

• Single Trans-Tasman ‘Distribution’ focus • Performance focus across branches and BUs to deliver

YOY improvements. An obsession in execution

• Successful co-location and business combinations leveraging group scale and synergies

• Cost containment relative to growth, through the cycle

2015 strategic review by external consultants focussed on the following three areas:

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• Clear and simple divisional strategy that is common across all its businesses• Demonstrable delivery in New Zealand over the last two years• New Zealand success and learnings now being applied to Australian business

units• Our focus is clear – growing profitably with an obsessive focus on execution• Distribution are clear enablers of overall Fletcher Building growth and value

creation, key drivers of group ROFE

Distribution has momentum and line of sight to continue to grow returns and shareholder value

FY15 FB Group average

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

PlaceMakers Mico TradeLink Stramit Steel DistnNZ

Other DistributionTotal

Current ROFE relative to Group

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Summary: continued progress within Distribution –growing earnings through strong execution

Superior returns

Service differentiation

Establish critical areas of

focus

Set “what good looks like”

Networkefficiency

Reduce complexity

Embrace Centralisation

NZ Distribution ROFE - 31.3%+813bps

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Superior returns



focus


Networkefficiency

Reduce complexity


Service Promises in

market

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Superior returns



focus


Networkefficiency

Reduce complexity


• Delivered 8 New Zealand co-located sites

• Planned program to do more

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Superior returns



focus


Networkefficiency

Reduce complexity


KPI scorecard and

performance focus

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Superior returns



focus


Networkefficiency

Reduce complexity


Leveraging Group Centres of Excellence (procurement,

operational excellence)

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PlaceMakersBruce McEwenGM PlaceMakers


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PlaceMakers on a page

• Relentless focus on service• No.1 market share position• New loyalty scheme covering wider SME market

• Record low cost to serve • Centralising back-office functions • Consolidation in Frame and Truss timber manufacturing

• 2,400 employees, 70%+ employee engagement• Performance focused operators / management team• Differentiated model

• Record turnover in H1 FY16• FY15 ROFE 41% – 25% CAGR from FY13 baseline• Average operating cash to EBIT - > 100% EBIT retention

People

Customers

Efficiency

Profitable growth

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Gross margin realisation

25%17% YoY

EBIT

$66.8m26% YoY

Revenue

$1,167m8% YoY

ROFE

41%13% YoY

Net operating profit retained*

$20m to $53m

FY15 KPI highlights from PlaceMakers improvements include double digit year-on-year EBIT growth

* Off FY13 baseline25

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PlaceMakers is the core revenue and profit engine of the Distribution division

FY15 revenue of $1,167m PlaceMakers generates

36% of the division’s revenue….

…and 45% of the division’s EBIT

FY15 Revenue

PlaceMakers

Rest ofDistribution

FY15 EBIT

PlaceMakers

Rest ofDistribution

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FY13

Revenue $0.95b

EBIT $36m

FY18

Revenue $1.4b

EBIT $100m

Our critical areas of focus to deliver on our strategy

Critical areas of focus

Serviceobsession

People capability/ engagement

Sales generation/ SOW

GM quality

Efficiency

FY13 Baseline:• Sales : $0.95bn• EBIT : 3.7%

Target:• Sales : $1.46bn• EBIT : 7%

No one is easier to do business with

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PlaceMakers is focused on efficiency to drive gross margin realisation improvements

0%

5%

10%

15%

20%

25%

30%

150.0

170.0

190.0

210.0

230.0

250.0

270.0

FY13 FY14 FY15

GM$ Cost to Serve $ GMR

Cost to Serve %320Bps

GM realisation940Bps

NZ$M

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• PlaceMakers has over 60 locations, with 53% of revenue relating to joint ventures owned with local operators

• Changed the joint venture model, reducing joint venture equity, increasing term and giving surety of direction

• Joint venture contracts now targeted on critical areas of focus and delivering superior returns

• Improved EBIT growth and net operating profit (NOP) retained drives shareholder value

Improved trading performance accentuated by the joint venture model change enhancing NOP retention

-

20

40

60

80

FY13 FY14 FY15EBIT Minority Interest EBIT

Momentum and structural changes driving shareholder

value

NZ$M

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H1 FY16 sales growth of +10% driven by strong growth in Auckland supported by regional growth

0%

5%

10%

15%

20%

25%

Q1 Q2

Auckland Sales Growth

FY15 FY16

+21% YTD

• Strategic focus on improving Auckland market share

• Changed business model in Auckland - was fragmented and difficult to compete

• One year later YOY growth +21%

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Sales generation in core categories remains critical area of focus

Category Opportunities Largest timber frame and truss manufacturer in New ZealandFrame and Truss sales continue to grow profitably - $115m p.a. growing at 13%Network consolidation into 8 sites

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50,000

60,000

70,000

80,000

90,000

FY13 FY14 FY15 FY16F

Frame and Truss - Cubic Metres produced

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Share of wallet focus is a key enabler for growth in white space categories

Category Opportunities

Share of wallet focus leveraging sales of finishing products, i.e. kitchens now a $25m business

GHB market share provides platform for further category extensions

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Targeted share of wallet campaigns take market share and increase pull-through of Fletcher Building products

…PlaceMakers has generated over $70m in competitive wins

Over the last 18 months…

Leverage frame and

truss capability for market

share

Pull-through benefits

for Fletcher Building

Creates higher margin

finishing products

sale

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Famous for differentiated service model and bringing this to life

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We are obsessed with service and are the only national distributor in our sector that publishes its service performance

Net Promoter Score

From 21 24.7

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We are measuring balanced performance across key metrics to maximise sustainable returns

CUSTOMER Monthly Actual Monthly Target YTD Actual YTD Target

Net Promoter Score 36.5% 28%

Telephony Service Promise 86% 85

Pricing Credit as % Invoice 0.16% 0.36% 0.23% 0.36%

RED DOT % 99.6% 100.0% 98.2% 100.0%

Customer Performance Score 20.00 20 18.00 20

EMPLOYEE Actual Target YTD Actual YTD Target

Safety Observations

Staff Turnover (12 Months %) 25.9% 27.0%

Absence (12 Months %) 1.3% 1.4%

Employee Expense/Sales % 7.5% 8.0% 7.3% 7.4%

Employee Performance Score 15.00 15 15.00 15

OPERATIONS Actual Target YTD Actual YTD Target

DIFOTIS 94% 95%

% Purchase from Primary Supplier 86.9% 95.0% 84.8% 95.0%

* Sales Per FTE (000) 66.0 59.0 424.1 424.6

* System Margin Per FTE (000) 14.1 12.9 91.2 92.7

Operations Performance Score 14.00 15 8.00 15

FINANCIAL Actual Target YTD Actual YTD Target

Debtor Collection % 87.1% 85.0% 85.5% 85.0%

Stockturn - Inventory Days 33.5 32.7

* Shrinkage % -0.3% 0.2% -0.1% 0.2%

* Freight Recovery % 41.4% 111.7% 116.9% 111.7%

Sales $ (000) 1,674.6 111.8% 10,392.0 108.3%

Final GM $ (000) 419.3 367.7 2585.8 2360.2

* Final GM % 25.0% 24.5% 24.9% 24.6%

Controllable Costs % of Net Sales 10.7% 11.9% 11.0% 11.1%

* EBIT $ (000) 195.8 144.1 1185.8 1023.8

EBIT % 11.7% 9.6% 11.4% 10.7%

Financial Performance Score 44.44 50 49.00 50

Overall Branch Performance Score 93 100 90 100

197 Wanaka

Active branch metric management

Significant improvement in overall branch performance

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In summary – customer leading behaviour is driving shareholder returns

• Service differentiation driving results and shareholder value

• Most profitable building supplies merchant in New Zealand

• ROFE – CAGR 25%• Gross margin realisation up from

16% to 24%• Record engagement and trading

levels • Positive momentum and line of

sight to deliver on strategic plan

Customer Leading.

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MicoBryn HarrisonGM Mico


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Mico on a page

People

Customers

Efficiency

Profitable growth

• Largest plumbing merchant in New Zealand• Differentiated service offer• Winning in back of wall and growing in bathrooms• Taking profitable share

• Co-location programme across Fletcher Building sites• Implementing a successful branch footprint in lowest

property cost to sales ratio

• 450 employees with record employee engagement• 66 branches nationwide – corporate ownership model

• Record turnover in Q4 of calendar 2015• On track to be ROFE accretive ~25% vs negative in FY13• Target ROFE of 30%+

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Over the last two years Mico has achieved an organic turnaround led and delivered by our people

FY15 EBIT*$3.5m

FY16F EBIT*$9m+

FY14 EBIT*($1.6m)

Business Focus:• Restructuring post

Pipelines move to Humes

Business Focus:• Revenue growth• Cost reduction• Integration with

PlaceMakers

Business Focus:• Market share

growth• Leverage

Distribution synergies

Note: * Trading EBIT before one-offs

Improved operating metrics on all fronts:• Customer – momentum• Efficiency – leveraging wider divisional and group resources • Growth – focus on profitable growth • People – turnaround in engagement and people talent

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Cost to Serve

26.6%1.6% improvement

EBIT

$3.5m$5.1m

Revenue

$210m

ROFE

7.8%11.2%

Branches co-located

8 branches+6 branches

Key FY15 highlights from the Mico turnaround include:

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Mico accounts for 5% of the Distribution division’s result, but is a positive internally led turnaround story over the last two years

Mico accounts for 7% of the Division’s turnover…..

…and 5% of the Division’s EBIT

FY15 Revenue

Mico

FY15 EBIT

Mico

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FY13

Revenue $0.95b

EBIT $36m

FY18

Revenue $1.4b

EBIT $100m

Our critical areas of focus to deliver on our game plan


Showroom growth

GM quality + 25bps

Take share:market +1%

Reduce our cost to serve

Lift performance of poor branches

FY14 Baseline:• Sales : $215m• EBIT : (1%)

Target:• Sales : $270m• EBIT : 6%


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Mico is the industry leader, differentiating itself with an industry first customer service promise

• Launched in June 2015

• Provides a tangible and defendable commitment to service for trade customers

• Yet to be followed by other industry participants

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0

5

10

15

20

25

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Tangible link with service promise and financial performance

Change in Daily Sales Rate vs SMLY (2015)%

The service promise has improved customer satisfaction

Net Promoter Score Oct 2014: 12

Net Promoter Score Mar 2016: 34 Service promise launch

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Mico’s strength was in BOW. We have grown FOW/ bathrooms and increased marketing activity for an improved balance

• Exclusive sponsorship and supply of bathroom fixtures to “The Block NZ 2015”

• Driven increase in footfall and showroom sales growth

• Drove increase in share in critical Auckland market

• New exclusive product ranges launched in tapware, vanities, sanitary ware at opening price points

• Enabler of critical focus on sales generation and share of wallet growth

Showroom products

Auckland Showroom +28%

Sales vs prior yearFYTD Feb-16

+10%

Exclusive Product Sales +12%

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Reducing the cost to serve has been key for Micoand will continue to be through the economic cycle

FY14 YTD

FY15YTD

FY16 YTD Target

GM% 26.4% 27.5% 27.9% 29%

Cost to Serve 28.4% 26.8% 24.7% 22%

→ People 16.4% 15.1% 13.6% 13.5%→ Property 5.4%* 5.5%* 4.9% 3.5%→ Other 7.4% 6.8% 6.2% 5%

EBIT (2.7%)* 0.6%* 6-7%3.2%

47* Adjusted for National Office, lease income no longer received

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Property cost reduction allows Mico to be profitable through the cycle

• Property cost focus enables profit through the cycle, as well as market share gain through additional points of presence

• Two key strategies:

– Co-location with Fletcher Building business units (PlaceMakers, Humes Pipelines)

– Small-format sites (Kumeu)

• Total property cost savings delivered since FY14 c.$2.2m p.a.

• FY19 target run rate savings of a further $2m p.a.

PlaceMakers Mico Palmerston North

Humes Mico Timaru

Mico Kumeu

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Growing global trend for trade supplies purchased online

• New e-commerce platform launched for bolt-on categories and further sales generation

• Equipsafety.co.nz website built over the last 6 months to enable another channel route to market

• Leading advancement into separate distribution channel to market

• Enables Mico to expand into adjacent categories and grow share

• Initial focus on work-wear and safety products, further categories to be added

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In summary – in-house turnaround and customer focus driving increased shareholder value

• ROFE on track for 20%+ (+12% YOY)

• Customer focused service promise underpinning sales and EBIT growth

• Investing for sales generation – new branches, e-commerce and marketing

• Drive efficiency through leveraging Fletcher Building assets

• Positive employee engagement and trading levels

• Delivered turnaround with more opportunities for earnings and topline growth

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Tradelink

Alan BallGM Tradelink


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Tradelink on a page

• Number 2 in market with 18% share• Densification of network providing additional locations to

service market• Executing a differentiated customer service promise in

Australia

• Reducing operational cost• Rightsizing branch network

• 1,600 employees• Performance focused operators and management team• Focus on training and development for sustainable growth• Experienced distribution senior leadership team

• 20 new locations per annum for next three years• Expansion of product categories to complement range• Destination showrooms to capture regional demographics

People

Customers

Efficiency

Profitable growth

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Tradelink provides the division with a platform to enable future earnings growth

FY15 Revenue

Tradelink

Rest ofDistribution

FY15 EBIT

Tradelink

Rest ofDistribution

Tradelink delivers 25% of the Division’s revenue…

…and is management’s number one priority to

deliver sustainable earnings growth

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Gross margin

28.7%1.4%

EBIT

A$15m31%

Revenue

A$732m3%

ROFE

4%18%

FY16 annualised labour savings

A$10m

FY15 financial summary:

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Tradelink is forecasting A$22m of EBIT for FY16 with a range of A$24 to A$28m expected for FY17

14

2224

1628

(4)

(4)

Trading EBIT Property Gain Restructuring Stock provisions FY16 Forecast FY17

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FY13

Revenue $0.95b

EBIT $36m

FY18

Revenue $1.4b

EBIT $100m

Our critical areas of focus to deliver on our plan


Showrooms

Densification of network

SME Customer

Talent Management

Efficiency

FY13 Baseline:• Sales : $0.68bn• EBIT : 0.6%

Long-term targets:• Sales : A$0.9bn• EBIT : 5%


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The Australian plumbing market remains an attractive industry served by two dominant players and independents

23% 21% 19% 18% 18%

40% 43% 46% 48%50%

36% 35% 35% 33% 31%

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2011 2012 2013 2014 2015

Tradelink Reece Independent Total Market

Market Size and share

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Tradelink is in year two of executing the ‘winning in plumbing’ strategy, with accelerated focus on network plumber (SME)

• Historically focused on large projects, which are volatile• In line with Tradelink’s strategy, focus now on network plumber for long-term

stability through the cycle• Lower cost to serve through higher collection (50%) and lower property costs

as a % sales• Aligning business and sales team to core growth segments

From ToNetwork plumber 20% 27%Projects 25% 27%Retail 11% 13%

Total 18% 23%

Network PlumberMix of maintenance, renovation and construction in

residential and non-residential

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Clear customer segmentation and alignment delivering market share growth

Trade Trade+ Trade+ Project Project

# Branches 2016

107 61 17 18

# Branches 2019

165 61 17 20

Annual Sales $1m - $5m $2m - $8m $3m - $10m $6m+

Branch Size 400 - 600 700 - 1,200 1,200+ 1,200+

People 3+ 5+ 9+ 9+

Famous For SME Plumber SME Plumber/Retail SME Plumber/Retail /Network Builder

House Builder and Commercial Plumber

• Plumbing core range

• Spares

• Plumbing core range

• Spares• Showroom• HVAC• Gas• Civil

• Plumbing corerange

• Spares• Showroom• HVAC• Gas• Civil

• Plumbing corerange

• Destination Showroom

• HVAC• Gas• Civil

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A program of branch expansion has commenced based on the ‘winning in plumbing’ trial. 60 new branches planned in next three years

Branch of the Future

• 80% of stock open to view/pick

• Circular standing counter

• ‘Break out’ area for refreshments and meetings

• 1-to-1 and self service

Winning in Plumbing (ACT Trial)• Fast moving pick up

stock open to view/pick• ‘Designer’ standing

counter• ‘Break out’ area for

refreshments and informal meetings

• 1-to-1 and self service

Trade SME only

• Proven model• Small Merch area• Basic counter with stools• 1-to-1 service• Better presentation of fast

moving consumables and common hand/power tools

Trial – 2014 Amended - 2015 Implement - 2016

Based on 700-800 sqm concept 400-500 sqm

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In line with our strategy, we need to invest for growth over the next three years, leveraging low cost format options

FY 2017 FY 2018 FY 2019 TotalQueensland 7 8 8 23

NSW 8 9 9 26

SA 2 1 1 4

WA 1 1 1 3

NT 1 0 0 1

Vic / Tas / ACT 1 1 1 3

• Having learned from the ACT pilot, we plan to spend A$10m over the next three years to expand our footprint by 60 branches

• Payback to be under two years• Branches will be consistent, leveraging the national brand and consistent range

and product classifications• We will also densify the metro areas with tactical regional openings where

appropriate• Current planned branches are:

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To regain share, Tradelink will refurbish its showroom network prioritising dormant branches following best practice from Mico

Bundaberg branch -A$45k investmentSales up 7%

63%11%

26%

Showroom Share FY15

Reece

Tradelink

Independent

A$1.5m investmentA$10m Sales IncrementPayback in 7 months2% Market Share gain

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Blue Room• Facilitates feedback and action • Driving ownership accountability and change

Induction• Facilitates culture and values learning• Driving customer service and personal brand

Learning & Development• Facilitates loyalty and opportunity• Driving Better Every Day performance and engagement

Women in Plumbing• Facilitates diversity and flexibility• Driving performance and engagement

Management are focusing on people engagement and talent development to accelerate strategy execution

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HVAC• $1.4bn market• Existing customer

segment• Targeting $16m

(1% share)

Gas Products• $100m market • Existing customer

segment• Targeting $3m

(3% share)

HVAC

Gas Products

FY17 FY18 FY19

E-Commerce• 3% market penetration• Fixed price point model• USA counterpart delivers

30% revenue through this route

E-Commerce

Whilst core growth remains a priority, Tradelink will enter white space, margin accretive categories. E-Commerce expansion offers further growth in the longer term

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SME Customer segment

Densification of branches

Developing and engaging our

team

In summary - management focus remains on the execution of the ‘winning in plumbing’ strategy and greater execution in three specific areas

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NZ Steel DistributionHamish McBeathGM NZ Steel Distribution

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NZ Steel Distribution on a page

• All BUs are 1st or 2nd in market• Executing a differentiated model driving volume and record

order book

• $3m of synergies realised over last 2 years• Network efficiencies have reduced distribution costs and

improved service offer • Capital investment in Fletcher Reinforcing and Pacific Coil

Coaters reducing operating costs

• 600 employees across four business units• 32 branches nationwide – 8 co-locations

• Pacific Coil Coaters record domestic volumes and 3% growth in market share

• Peak sales run rate for Easysteel• Long-term sales pipeline boosted by customer order book

at Fletcher Construction

People

Customers

Efficiency

Profitable growth

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NZ Steel Distribution is a key enabler of the overall division’s EBIT outcome

FY15 Revenue

NZ SteelDistributionRest ofDistribution

FY15 EBIT

NZ SteelDistributionRest ofDistribution

NZ Steel distribution delivers 14% of the

Division’s revenue...

…and 25% of the Division’s EBIT returns

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FY15 KPI highlights from NZ Steel Distribution include:

Gross margin

19%1%

EBIT

$36m7%

Revenue

$437m7%

Pacific Coilcoaters scrap rates

7%4%

Steel Distribution ROFE

30%2%

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FY13

Revenue $0.95b

EBIT $36m

FY18

Revenue $1.4b

EBIT $100m

Our critical areas of focus to deliver on our game plan


Serviceobsession

People capability/ engagement

Sales generation/ SOW

GM quality

Efficiency

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FY13 Baseline:• Sales : $396m• EBIT : 7%

Target:• Sales : $540m• EBIT : 11%


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Leadership delivering the core engagement drivers upon integration

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Differentiating our service offer

• Launched main colours 48 hours, Make to order 5 days - Industry Benchmark 7-9 days• Simplified product offer – Good, Better, Best• Increased technical support resource to ensure customer has support in product selection• Utilising Easysteel network to provide regional stock locations• Providing app-based tools and online solutions for customers• Penalty based service promise

Outcomes have been record demand, 3% share growth, positive customer outcomes

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Each business within NZ Steel Distribution’s portfolio has three key areas of focus that will deliver sustainable profit

F15 EBIT F18 EBIT

ShareMargin

MarketManufacturing

ShareMarket

MarketShare

Bar sizes indicative only

Manufacturing

Margins, share, manufacturing excellence and synergies will underpin NZ Steel Distributions’ projected earnings growth

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The current iron ore pricing will have negatively impacted many industry participants. At these prices there is increased risk from steel suppliers who may

not be able to trade through the current cycle

Despite challenging raw materials pricing New Zealand Steel Distribution still delivers profitable growth

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• NZ Steel Distribution is a positive contributor to the overall Fletcher Building Group earnings

• Focused on customer, synergies, manufacturing excellence and managed costs

• Sustained improvements in international steel commodity pricing will have further positive impacts on trading results

• Positive employee engagement and lifted trading levels • Momentum with further opportunities to deliver incremental

shareholder value through growth, synergies and potential bolt-on opportunities

In summary – BUs are well positioned for growth through the cycle and enhancing a differentiated model

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StramitPaul TudorGM Stramit


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• No. 2 market share position• High brand equity and national coverage• Immediate focus on creating a sustainable value

proposition within a competitive market

• $2.2m of annualised overhead savings achieved in H1• $2.7m of annualised manufacturing efficiencies achieved

in H1• Continued focus on simplification

• 850 skilled employees across 20 locations• New GM and experienced management team• Continued focus on engagement, capability and

accountability

• FY15 ROFE of 8% with an improving run-rate• Targeted ROFE of 20% by FY18• FY16 H1 EBIT up 134% with strategy to deliver improved

returns

Stramit on a Page – Australia’s 2nd

largest roll former

People

Customers

Efficiency

Profitable growth

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Stramit provides 15% of the Distribution division’s revenue and has scale to provide further organic top-line and earnings growth

FY15 Revenue

Stramit

Rest ofDistribution

FY15 EBIT

Stramit

Rest ofDistribution

Stramit delivers 15% of the Division’s revenue…

…and 9% of the Division’s EBIT

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Perth

Darwin

Cairns

Townsville

Mackay

Rockhampton

Maryborough

Brisbane(Eziform)

NewcastleOrangeSydney

Coffs Harbour

Brisbane

CanberraAlburyBendigo

Melbourne (Taurean)Melbourne

Hobart

Adelaide

2nd in market with a focus on profitable organic growth

• $459m in sales in FY15• Australia’s 2nd largest steel roll

former, supplying roofing, cladding, rainwater and roller door systems

• Operating 20 distribution facilities across the country –scale and momentum to return EBIT to pre-GFC levels

• Five companies are estimated to account for approx. 85% of the Australian steel roll forming market*– Lysaght / Fielders ~30%– Stramit ~20%– Metroll / Roofmart ~15%– Steeline Franchises ~10%– Stratco ~10%

Th A li l ll

FY15

The Australian steel roll forming market shifted

655,000* tonnes in FY15

* Estimate only (includes ~10% imported steel)

Regional centres

Major metro centres

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Stramit supports 5,800 customers across three key markets

Markets

Residential

% FY15 Sales: 52%

Commercial

% FY15 Sales: 24%

Sheds

% FY15 Sales: 24%

Customers

3,700 customers:• Installers• Distributors

1,200 customers:• Installers• Fabricators• Form workers

900 customers:• Franchisees• Distributors• Independents

Products

• Roofing• Cladding• Rainwater• Doors

Pre-engineered buildings and designs

Brands

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FY15 GM

16.2%0.8%

FY15 EBIT

A$12.5m26%

H1 EBIT

A$7.5m134%

H1 GM

16.3%9%

Financial insights for FY15 and H1 FY16

FY15 Revenue

A$459m3%

FY15 ROFE

7.7%15%

H1 Cost Out

A$4.9m of annualised savings

H1 Revenue

A$241m0.2%

H1 ROFE

9.0%156%

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Our critical areas of focus to improve shareholder returns

Critical Areas of Focus

Making it easier forour customers

Workforce engagement, capability and accountability

Product and process simplification

Smarter buyingand selling

Network performance and efficiency

We’re moving forward, at pace, with an owner’s mindset

FY13 Baseline:• Sales : A$462m• EBIT : 2.9%

Target:• Sales : A$500m• EBIT : 8%


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Our critical areas of focus to improve shareholder returns

Critical Areas of Focus

Making it easier forour customers

Workforce engagement, capability and accountability

Product and process simplification

Smarter buyingand selling

Network performance and efficiency

We’re moving forward, at pace, with an owner’s mindset

FY13 Baseline:• Sales : A$462m• EBIT : 2.9%

Target:• Sales : A$500m• EBIT : 8%


Holding market share and pursuing profitable growthHolding market share and pursuing profitable growth

Employee engagementat 67% (up 12%)

Employee engagementat 67% (up 12%) $4.9m of waste, labour and overhead

reductions contributing to FY16 EBIT$4.9m of waste, labour and overhead reductions contributing to FY16 EBIT

Improved pricing disciplines contributing to FY16 EBIT

Improved pricing disciplines contributing to FY16 EBIT

Well positioned to better leverage Fletcher scale and buying power

Well positioned to better leverage Fletcher scale and buying power

Shut underperforming branches and actively purse site synergies

Shut underperforming branches and actively purse site synergies

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We’re on track heading into FY17 to deliver improved returns and a differentiated model

FY16 FY17 FY18Profit

improvementCustomerobsession

Accelerated organic growth

Shareholder outcomes

Reduce our overheads and operating costs

•Significantly improvenet margins

•Simplify our SKUs•Rebuild and de-risk supply relationships

•Optimise the network•Pursue profitable topline growth

•Sweat the assets

Customeroutcomes

Listen to our customers and refresh our value proposition

•Make it easier for our customers

•Deliver on our customer promise

•Grow profitable SOW and market share

•Deliver product / service innovation

Employee outcomes

Simplify our management structure

•Simplify sales and customer service

•Strengthen regional and functional teams

•Embed a high performance culture

•Prioritise succession and sustainability

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In summary – we’re increasing our profitability and building a strong customer focussed business

• Successfully removed $4.9m of annualised cost during H1• On track to deliver an EBIT result that is a marked improvement

on FY15• Preparing to launch a promise that will align our workforce to

what truly matters to our customers• Transforming our sales and customer service capabilities –

smarter selling• Working to improve supplier performance and reduce costs –

smarter buying• Obsessed with significantly (and rapidly) improving EBIT and

ROFE

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DistributionDivision


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Our strategy is clear and is delivering strong returns in New Zealand. Now being applied in Australia

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Superior returns


Establish critical areas of focus


Networkefficiency

Reduce complexity


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For personal use only - ASX2016/04/06 · Residential & Land Development: Steve Evans Construction:...

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Transcript of For personal use only - ASX2016/04/06 · Residential & Land Development: Steve Evans Construction:...